In every Budget there’s a measure on which the government attempts to row
This year it’s the new rule insisting that finance directors, or senior
accounting officers, personally certify their accounting systems produce the
right tax calculations. Where once it would affect 15,000 of the largest
businesses it will now only touch 2,000.
But while some experts have greeted the measure philosophically and with
resignation that nothing alarming will happen as a result, others appear no
happier than they were when the new demands emerged on Budget day in April.
Angus Johnston, tax management and accounting services leader at PwC, says
while the move caused alarm initially, HMRC had been seeking a way of dealing
with the risk to tax revenues posed by accounting systems for many years.
‘Is this going to be an exercise where people go through the process only to
have confirmed what they already know that they’re tax system is fine. Or, is
it going to expose the fact that there’s risk that’s been hidden from view?’
Johnston expects the vast majority of the 2,000 businesses subject to the new
certification process to be fully compliant already. ‘I don’t expect this to
show massive problems for large businesses because I think tax functions have
been aware of where their risk areas are,’ he says.
He believes the real issue causing concern is the effort required for
businesses to maintain the necessary level of governance.
That might just give HMRC all the reason it need to impose the rule. But
there is a legitimate issue to address about the financial and administrative
burden placed on business, and exactly how the rule will be implemented.
A Deloitte survey estimated the cost of compliance for most large companies
to be between £50,000 and £250,000. It also revealed 58% of FTSE 100 companies
and 64% of FTSE 250 firms believe that incurring a penalty would have a
detrimental impact on the career of their senior accounting officers.
According to Anita Monteith, tax faculty technical manager at the ICAEW, the
2,000 companies in the scope of the measure ‘will need to do something to
She says the fact HMRC already has legislative power to penalise companies
for poor tax accounting systems has rightfully fuelled the concern.
‘It’s a penalty on a penalty. We’re very concerned about the way it’s been
brought in without any prior consultation and the way the whole process has been
stream-rolled,’ she says.
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